Joseph Padgett v. City of Monte Sereno, 15-15867

Background

Padgett terminated his counsel (Kallis; Bustamante) during litigation and later contested the district court allowing those former attorneys to seek attorneys’ fees.
On prior appeal the Ninth Circuit remanded for the district court to articulate the rationale supporting its award of fees and costs.
While on appeal the presiding district judge retired; the case was reassigned and the new judge ordered parties to file motions/supplemental materials on remand.
The district court sua sponte dismissed Padgett’s claim for fees as a sanction for failing to file a new motion on remand and later awarded fees to Padgett’s former attorneys; Padgett appealed.
The Ninth Circuit panel held the district court may have erred in permitting former counsel to pursue fees without first determining whether fees belonged to counsel (contract or lien issues) and vacated/remanded that portion; it also found the dismissal sanction was improper without adequate warning and consideration of lesser sanctions.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether former attorneys may seek attorneys’ fees after termination	Padgett: fees belong to him unless attorney lien or contract justifies counsel keeping fees	Former counsel/defendants: prior precedent (Virani) permits counsel to seek fees after termination	Court: Remand required — district court must determine whether contractual provisions or attorney lien justify fees to counsel rather than plaintiff; prior Virani reliance was misplaced without this inquiry
Whether the district court complied with the rule of mandate by ordering new filings on remand	Padgett: ordering new motions exceeded the mandate	Defendants: mandate required rationale and the new judge reasonably sought information to comply	Court: Ordering motions/supplemental documents was within the mandate and permissible given reassignment and need for explanation
Whether dismissal of Padgett’s fee claim under Fed. R. Civ. P. 41(b) was proper sanction for failing to file on remand	Padgett: dismissal was entered without clear warning and without exploring less drastic sanctions	Defendants: dismissal appropriate for failure to comply with court orders	Court: Dismissal was excessive — court failed to give clear warning or consider lesser sanctions; reversal required
Whether the appeal was timely as to the dismissal order	Padgett: his appeal from the final fee award encompasses earlier non-final orders	Defendants (concurring judge view): dismissal was final earlier and appeal is untimely	Court: January 10, 2014 order was not final as it left costs unresolved and stayed proceedings; it merged into the final March 31, 2015 order, so the appeal was timely

Key Cases Cited

United States ex rel. Virani v. Jerry M. Lewis Truck Parts & Equip., Inc., 89 F.3d 574 (9th Cir. 1996) (qui tam fee-allocation precedent relied on by district court)
United States v. Kim, 806 F.3d 1161 (9th Cir. 2015) (recognized abrogation of aspects of Virani)
Gilbrook v. City of Westminster, 177 F.3d 839 (9th Cir. 1999) (distinguishing qui tam recovery from civil‑rights fee allocation)
United States v. $186,416.00 in U.S. Currency, 642 F.3d 753 (9th Cir. 2011) (attorney fee ownership principles in civil cases)
Stacy v. Colvin, 825 F.3d 563 (9th Cir. 2016) (rule of mandate permits district court to decide matters not foreclosed by mandate)
Padgett v. Loventhal, 706 F.3d 1205 (9th Cir. 2013) (prior mandate requiring articulation of fee rationale)
United States v. Perez, 475 F.3d 1110 (9th Cir. 2007) (distinguishing what remains open on remand from matters decided on appeal)
Henderson v. Duncan, 779 F.2d 1421 (9th Cir. 1986) (five‑factor test for dismissal under Rule 41(b))
Hamilton v. Neptune Orient Lines, Ltd., 811 F.2d 498 (9th Cir. 1987) (reversing sua sponte dismissal for lack of clear warning and lack of consideration of alternatives)
Munoz v. Small Bus. Admin., 644 F.2d 1361 (9th Cir. 1981) (non-final orders merge into final judgment on appeal)